Making money work harder: How Nesta funds innovation

It’s our 20th birthday this month. Nesta has been around since 1998 - first as a non-departmental public body and, since 2012, as an independent charity and foundation, joining an ecosystem of UK funders giving grants, prizes and loans for social good.

Our specialism of course is backing innovators, and since becoming a charity we’ve given away almost £60m in grants alone to 684 recipients.

And as we embrace organisational adulthood, we have been publishing a series of practice guides to explain to the applicants, partners and co-funders what we’ve learned about the best ways to use funding as a tool for innovation for social good.

Over the years, we have experimented with many different ways of using money to achieve results - from stage gate grant funding to matched crowdfunding, from grants which convert to repayment, equity or loans, and from challenge prizes to impact investing. So I’m delighted that today we’re launching Funding Innovation - a practice guide to making money work harder which sets out each of these methods, and when they are most useful, in one place.

We haven’t always got it right of course. Over our 20 years we’ve designed some funds that just didn’t work. Many of our first forays into repayable grants in 2012 didn’t lead to repayment! And with responsibility for Nesta’s grant making, I can hold my hands up and say that in 2016 we tried to use grant finance to encourage more Randomised Control Trials in the voluntary sector, but the incentives just weren’t right and we pulled the whole programme.

But many of our other financing experiments have been far more successful and have gone on to become a mainstream part of Nesta’s offer. For example:

We’ve created repayable finance mechanisms to help innovations in the public sector flourish with small grants (£15-20k) given to help innovators demonstrate financial savings, leading to larger loans (£500k-£1m) repayable over 5-10 years.

We backed many emergent crowdfunding platforms in 2012, and have pushed this now established field to continue to innovate through matched crowdfunding for government institutions.

We’ve changed how we give grants to act more like an investor than a high volume grant giver, with significant non-financial support like training, advice, introductions and business development from our staff alongside every grant.

We’ve championed the uptake of challenge based prizes by governments, charities and businesses around the world to prompt new solutions to come to market.

It’s this breadth of methods we want to encourage other foundations and government funders to experiment with. Too often, funders tend to stick to just one or two methods for funding innovation (usually non-repayable grants) and so miss out. We hope this guide offers some digestible case studies of others that might be more appropriate.

But we also want to continue learning ourselves. Most 20-year-olds have a fair sense of what their future might look like, but still have much to learn. Nesta, aged 20, is no different. As I reflect on Nesta’s own grant-making practice and look ahead I feel that same mix of assurance and anticipation. We can be confident in the methods we’ve honed to date, but undoubtedly have new ones to trial or to import from other foundations. We therefore share this new practice guide humbly - to show what works, but also to invite others to help us add to and refine our own methods.

If you’d like to be part of that conversation then join us on 17 January 2019 as we discuss these financing tools and others out there. We might even save you a slice of 20th birthday cake.

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